KATHARINE HALL: Budget short-changes those in greatest need — children

Social grants are always increased at the beginning of the financial year. It is crucial that the increases keep pace with inflation, to prevent their buying power being reduced and poor households having even less money for food, transport and other basics.

In his state of the nation address on February 9, President Cyril Ramaphosa promised to “ensure that social grants are increased to cushion the poor against rising inflation”.

Two weeks later, finance minister Enoch Godongwana presented the 2023/2024 budget and announced the grant increases. He was careful to clarify that “this is not an austerity budget”, and that there would be no cuts to the social wage despite the need to maintain a “prudent fiscal stance”.

Civil society groups such as the Budget Justice Coalition were quick to point out that social spending in the budget is indeed austere. In real terms there are cuts to spending on education, health and grants.

Not enough to feed a child

Of all the permanent social grants, the Child Support Grant (CSG) is by far the smallest. Currently set at R480 per child a month, it is less than a quarter of the value of the Older Persons, Disability and Care Dependency grants (all R1,990 per month).

When the CSG was introduced in 1998, the intention was to cover the costs of feeding and clothing a child. It no longer covers either. This is a worrying regression given the persistently high rate of child malnutrition and atunting rate of 27% among children under the age of five.

The Stats SA monthly food poverty line was R663 per person in 2022. That’s the amount required to provide the minimum daily calories for survival and health, as defined by the World Health Organisation. The gap between the CSG and the food poverty line has widened over the years.

More for the wealthy, less for the poor

There were widespread hopes for a substantial increase to the CSG in this year’s budget, especially after Sars announced that tax collections are expected to exceed the 2022 budget estimate by R93.7bn.

Inexplicably, Treasury opted to spend a large part of this windfall on the wealthy. There will be no increases to personal or corporate income tax. Instead,  taxpayers will receive R13bn in relief. That’s almost as much as the R15bn allocated to inflation adjustments on nearly 20-million grants that support a third of our population.

The grant increases do not live up to the president’s promise of keeping pace with the rising cost of living. There are two basic errors in the so-called inflation adjustments to the CSG, an explicitly poverty-targeted grant.

Cost of living versus inflation

First, the increase fails to keep pace with the cost of living for the poor. SA's income distribution is highly distorted: half the population receives less than 10% of all income, while the wealthiest 10% receive more than 50% of all income. Moreover, inflation is greater for those at the lower end of the income spectrum.

The CSG will rise from R480 (April 2022 value), to R500 in April 2023 — an increase of 4.2%. Treasury has deferred a small second increase (R10) to October, bringing the average increase over the financial year to R25, or 5.2%.

Treasury may argue that the increase is inflation-linked because it is close to headline inflation. Yet headline inflation is simply an average of many inflation indices. Poor households are hardest hit by price increases since they spend a larger share of their budgets on basic food, public transport and energy, relative to wealthier households — and inflation in these categories is higher than the headline rate.

If the CSG increase were aligned with inflation for the poorest quintiles it would need to be at least R520 in April. If aligned with food inflation (as food is the primary purpose of the grant), it would be R535.

No adjustments for inflation

A second error is that Treasury uses projected inflation figures to determine the grant increases but fails to adjust the amounts later if its projections are wrong.

Inflation in the previous year was higher than expected. At the beginning of last year the Treasury projected a headline inflation rate of 4.5% for 2022/2023, and that informed a 4.5% increase in the CSG, from R460 (the 2021/2022 value) to R480.

The revised inflation rate for 2022/2023 is now 7.1%. By Treasury’s own estimate, the CSG should have received a compensatory increase, correcting the grant amount to about R493 before the 2023/2024 inflation increase was calculated.

Had that been done and had Treasury applied a food-related inflation increase to the CSG in its projections (assuming food inflation stays high), then the monthly CSG in 2023/2024 could have increased to as much as R550 per child,

Every parent knows that R550 a month isn’t enough to support or even feed a child. But when this small amount is multiplied by the anticipated 13.4-million beneficiaries, the failure to keep pace with actual inflation means the Treasury is saving almost R7bn. Another windfall, this time extracted from the most vulnerable children.

Stunted increases, stunted children

Increases to the bigger permanent grants are also less than inflation, while the Covid-19 Social Relief of Distress grant remains at R350 for a third year. The effective reduction in real value will be felt by children and adults alike, and will further erode the ability of the CSG to support children in households with unemployed adults.

Those who depend on social grants — the most vulnerable — will be even poorer this year than they were last year. It is a deliberate choice to cut the social wage, including the safety net for children, and it is not prudent.

Children who are physically and cognitively stunted due to poor nutrition struggle to learn at school and to get jobs. The long-term outcome is a stunted economy.

• Dr Hall is a senior researcher at the Children’s Institute, University of Cape Town, and a member of the Budget Justice Coalition.